About This Quiz
Banks have come under scrutiny with the tumultuous economy -- they do much more than just hold on to your money for you. Take the quiz and see if you know how banks really work.The primary function of banks is to put their account holders' money to use by lending it out to others to do things such as buy homes, start businesses and send kids to college. Banks create money in the economy by making loans.
The U.S. Federal Government established the Federal Deposit Insurance Corporation (FDIC) to back deposits in case the bank failed.
Banks make money with fees they charge for services and from the interest they charge on loans. The interest they charge is higher than the interest they pay on depositors' accounts.
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The agency that charters the bank is primarily responsible for protecting the public from unsafe banking practices. It conducts on-site examinations to make sure the bank's financial condition is good and that the bank is complying with banking laws.
The credit histories and relevant business histories of the bank's directors and CEOs will greatly affect the acceptance or denial of the bank's charter.
Bank organizers are typically responsible for 10 percent to 15 percent of start-up capital of a bank. The remainder is sold to shareholders.
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The Federal Reserve Act requires banks to keep a certain percentage of their money in reserve. Despite this, if everyone came to withdraw their money from the bank at the same time, there wouldn't be enough.
A NOW (negotiable order of withdrawal) account is like a checking account that pays interest. Money market accounts and certificates of deposit have more limitations on when you can withdraw money.
A bank holding company is a company that holds a significant amount of stock in a bank and has a certain amount of control over the bank.
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